Time Warner Cable (TWC) to be Acquired by Charter Communications Corp.

Shares of Time Warner Cable Inc. (TWC) were trading up +15.07 or +8.8 percent to $186.25 per share in Tuesday's premarket after news that the company had reached an agreement to be purchased by Charter Communications Inc. (CHTR) in a deal worth approximately $78.7 billion. Time Warner Communications stock closed at $171.18 per share, up +5.66 or +3.42 percent in Friday's regular trading session.

New York City based Time Warner Cable Inc. is the nation's second largest cable telecom provider, operating in 29 states with 31 operating divisions.

Originally named Warner Cable Communications, the company, controlled by Time Warner at the time was spun out of the parent corporation in March of 2009. The company continues to use the Time Warner brand but has no corporate affiliation with cable channels owned by Time Warner such as HBO or CNN.

Stamford, Connecticut based Charter Communications Inc. was founded in 1993 and is the fourth largest provider of cable television in the United States, after Comcast, Time Warner Cable and Cox Communications. In addition to cable television, the company provides broadband and digital telephone services in 29 states serving over 6 million customers.

The deal, which was announced earlier this morning, will have Charter Communication pay $100 in cash for each Time Warner share in addition to shares in a new public company which will be named "New Charter . The deal will give 0.5409 shares of New Charter to for each Time Warner share.

The transaction - worth $78.7 billion including debt and $55.33 billion excluding debt - values Time Warner shares at approximately $195.71 per share, a +14.3 percent premium over Friday's closing price and a +22.3 percent premium over Comcast's (CMCSA) failed bid of $45.2 billion, which it made for Time Warner Cable on April 23rd.

Charter said it would amend its previous agreement with Advance/Newhouse Partnership in its effort to buy Bright House Networks for $10.4 billion. After the merger with Time Warner Cable and Bright House, New Charter will be a broadband company serving as many as 23.9 million customers in 41 states.

In a statement after the announcement, Tom Rutledge, Charter Communications' President and Chief Executive Officer said that, "With our larger reach, we will be able to accelerate the deployment of faster Internet speeds, state-of-the-art video experiences, and fully-featured voice products, at highly competitive prices". Rutledge will head up the New Charter entity, serving as President and CEO and will sign a new five year employment contract.

In addition, Rutledge will be offered a position of chairman of the New Charter board of directors. The new board will consist of 13 directors including seven members nominated by the existing Charter board. Three directors will be nominated by Liberty Broadband, a large stakeholder in the company, and two by Advance Newhouse. Charter's present chairman, Eric Zinterhofer will continue to serve on board of New Charter.

Shareholders are showing their optimism for the new deal, with Charter Communications stock up almost four percent in this morning's premarket. Nevertheless, the deal could run into regulatory hurdles. According to a statement made by FCC Chairman, Tom Wheeler earlier today, "In applying the public interest test, an absence of harm is not sufficient. The Commission will look to see how American consumers would benefit if the deal were to be approved.

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Published on May 26, 2015

By Jay Hawk

Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.